14 May 2018

Mozambique: Central Bank Publishes Sanctions Against Mozambique Directors

Maputo — The Bank of Mozambique on Monday published the list of eight former directors of Moza Bank, once the fourth largest commercial bank in the country, whom it has fined for their alleged roles in serious irregularities leading up to the bank's near collapse in 2016.

The crisis in Moza Bank, became public knowledge on 30 September 2016, when a liquidity crisis led the Bank of Mozambique to step in and sack the entire board of directors, imposing a provisional board, headed by one of the country's most experienced bankers, Joao Figueiredo.

The central bank injected large amounts to keep Moza Bank afloat while it was restructured. As a result, Kuhanya, the company that manages the central bank's pension fund, became the majority shareholder.

The Monday statement from the central bank said the former directors were "implicated in the deterioration of the financial and prudential position of the institution from December 2015 until the intervention by the Bank of Mozambique in September 2016".

The penalties imposed include fines ranging from 200,000 to 500,000 meticais (3,300 to 8,250 US dollars, at current exchange rates), and a ban on holding office in any bank for period of between two and three years.

These penalties cover all eight members of the board who were in office on 30 September 2016. The most prominent of these is the then chairperson of Moza Bank, Prakash Ratilal, who is a former governor of the Bank of Mozambique.

The central bank release said publication of these sanctions "seeks to prevent similar situations and guarantee transparency in the management of credit institutions and financial companies, as well as to protect the interests of depositors, investors and other creditors, and to safeguard the normal functioning of the monetary, financial and exchange markets".

The sanctions will come as no surprise to anyone who follows the Mozambican press closely, since the independent weekly "Savana" ran the story in late April.

While the release from the Bank of Mozambique gives no details about the alleged irregularities, the "Savana" piece said the inspection by the central bank, found that Moza Bank did not comply with its duty to draw up policies and procedures for managing operational risks, had not identified and measured those risks, and had not approved policies to guide the management of liquidity. Among many other alleged irregularities, there were also no contingency plans to deal with situations of shortages of liquidity, and no policy to manage conflicts of interest.

The former Moza directors have 15 days to appeal against the penalties through the courts, but must pay the fines first (although the money will be returned if the appeals are successful).

Asked by "Savana" if he intended to appeal, Ratilal said that, "even with the option of resorting to the courts, my stance is to comply with the decision of the regulator".

Ratilal pointed out that he was one of those who helped build the Bank of Mozambique, and it was an institution "of which I am proud, and for which I have deep respect". He had always acted in good faith, he said, and had always respected the country's institutions.

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